Foreign currency deposits are losing popularity in Ukraine

The National Bank of Ukraine has announced a significant slowdown in the flow of new foreign currency deposits, indicating a decline in the popularity of this instrument among the population.

This data is included in the Financial Stability Report for June 2023.

"As the foreign exchange market stabilizes and the difference between cash and official currency exchange rates shrinks, households lose motivation to purchase non-cash foreign currency for deposits. In addition, given the increase in deposit rates, term deposits in hryvnia are becoming more attractive than those in foreign currency. Therefore, the maturity of old deposits and a significant slowdown in the flow of new ones have led to a downward trend in the volume of time deposits in foreign currency," the statement said.

The NBU also points out that funds are not being withdrawn from household current accounts. This leads to almost unchanged volumes of foreign currency financing provided by households to banks.

Banks continue to keep most of these funds in highly liquid assets, as foreign currency lending is almost non-existent. Therefore, banks are not interested in increasing the volume of foreign currency deposits and offer low rates for such deposits, the NBU explains.

At the same time, this component of funding does not create additional liquidity risks for banks, which is a positive factor for the bank liquidity system. In general, the slowdown in new foreign currency deposits is reflected in changes in the ratio between different types of deposits and indicates a change in the population's choice of the most profitable ways to save money.